The fall in the pound is good news for Britons who are selling a holiday home in Europe: they can now pocket tens of thousands of pounds more from their villa, gite or seaside apartment than before the Brexit vote, thanks to sterling’s weakness.
More British-owned properties are coming on to the market in holiday home hot spots, particularly in France and Spain, estate agents say.
Currency dealers confirm the trend.
The number of transactions from euros to pounds has leapt by a fifth since this time last year, according to FairFX, a foreign exchange firm.
With buying and selling property abroad, timing is everything.
Get it right and you can win big. Getting it wrong, buying when the pound is weak and selling when it is strong, could leave your bank balance permanently damaged.
For example, if you spent £500,000 on a European holiday home in January 2002, when your pound bought €1.65, and sold again in March 2009, when a pound could be bought with just €1.09, you would bring back £746,000, ignoring property price movements.
That would allow you to chalk up a profit of almost 50 per cent, even if property prices failed to rise.
However, reverse that pattern by buying property abroad when the pound is weak and selling when it is strong and you could lose life-changing sums of money.
If you invested the same £500,000 in a holiday home in March 2009 at €1.09 and sold in November 2015, when sterling had recovered to €1.40, you would bring back just £383,000, a loss of £117,000 or almost a quarter. The difference between good timing and bad is £363,000.
Mark Bodega, of HiFX, a foreign exchange firm, said: “We have seen sterling range against the euro from a high of €1.76 to a low of €1.02 at the peak of the credit crisis.”
However, he said, although he expected sterling to tread water at its current level in the near future, the currency might climb as Brexit talks proceeded.
“Sterling has the negatives of Brexit priced into it, and the uncertainties as we start negotiations with the EU will keep it on the back foot,” Mr Bodega said.
“But we feel there will be some common ground reached in the coming months and this should help the pound reclaim territory above €1.20 by the end of the year.”
Jason Hollands, of Tilney, a financial planning firm, warned that the future trajectory of sterling was by no means certain.
“There are two very polarised views on sterling right now,” he said. “One is that it will recover. The other is that if Brexit is messy it could go lower still.
“What we do know is that currency markets are skittish and when they do move it can be sharp and surprising.”
A weak pound can be good for buyers as well as sellers
Today’s currency sweet spot may present opportunities for buyers, too, because there are already more sellers than property hunters, according to Rupert Fawcett, of Knight Frank, the estate agent. “In some places the market is already saturated with property because of the challenges it has faced since the crash,” he said. “Activity has been slow, and some properties have taken a long time to sell, leading to a glut.”
But he said demand from Britons for holiday properties in France, for example, remained buoyant. If the weaker pound helped sellers to be more flexible over price, it would make them easier to sell.
James Stewart, who sells villas and apartments in Sotogrande, Andalusia, in association with the estate agent Savills, agreed that when a property owner was considering selling, a favourable exchange rate could help to get a deal away.
“We had an owner who rejected an offer when the euro was at a particular level but accepted it when the pound fell further,” he said. “The property price didn’t change, but the fact that they would now get more pounds for their property meant they felt comfortable.”
How best to transfer your money
If you are able to conclude a successful sale, it is important not to let foreign exchange and transfer costs eat your profit. With property prices in France averaging £464,000, Spain £235,000 and Portugal £218,000, a few decimal points on the exchange rate can add up to thousands of pounds.
Always shop around to see if you can get a better deal rather than simply using your own bank, where transaction charges may be high and the exchange rate you are offered may not be the keenest.
Many money brokers and currency dealers claim to offer better value, but if you take this route you must ensure that the firm is properly regulated and your money is safe.
Charges come in two forms: basic transfer transaction fees, which may be levied by the local bank and your receiving bank here in Britain, and the profit the firm makes on the exchange rate.
Watch out for companies that claim to be “commission free” as many simply adjust the exchange rate in their favour to make more profit.
Working out which firm will be cheapest is not easy and involves some leg work. There is no alternative to telephoning or emailing a range of banks and currency brokers and asking them how many pounds you will get from the amount in euros that you expect to make from the property after all charges.
As currencies fluctuate all the time you will need to carry out the exercise in one go to get a realistic comparison.
We asked some leading banks and dealers how much they would pay in sterling for €400,000 after their charges but not including any fees levied by the local bank in Europe. FairFX said £432,900, Virgin Money £431,600, HiFX £433,000 and Barclays £431,000.
Protect your rate for peace of mind
Always check that any currency firm you use is fully authorised by the Financial Conduct Authority in Britain and is covered by the Financial Services Compensation Scheme, should anything go wrong.
If you have a euro nest egg to bring home in the near future you can use a “forward contract” to protect against exchange rates moving against you. HiFX said it had seen a 23 per cent increase in the numbers of both buyers and sellers using forward contracts since the beginning of the year.
“Sellers, in particular, are looking for peace of mind,” Mr Bodega said.
“Many more property buyers are also now choosing to use forward contracts than before the financial crisis, suggesting that they are more cautious about the negative effects of exchange rate movements.”